Magflation: An Unexpected Gold And Silver Driver

During the 1970s, the U.S. experienced a decade of below-trend economic growth combined with rising interest rates – and eventually – massively higher gold and silver prices.

Some sectors boomed while others lagged, and then as now, the majority of the population struggled with rising home and commodity prices, bookmarked by lofty interest rates.

This stilted and challenging environment, which came to be called stagflation, eventually drove the more perceptive people into gold and silver.

The result?

Gold, having been freed from its long-term tether of $35, first rose to $200, then dropped to $100 before rocketing to an all-time nominal high of $850.

Gold, Ingots, Treasure, Bullion, Gold Bars, Wealth

Image Source: Pixabay

As per usual on a percentage basis, silver rose even more, topping out at $50 the ounce.

For years now, (officially-stated) inflation has been annualizing at one or two percent per year. Most people, including the current generation of market participants, have little or no memory of the relatively high inflation, interest rates, and metal prices of the late ''70s.

They may be about to get a shock...

Plata o Plomo?

Mexican bandits, when attempting to relieve victims of their money, might ask them "Plata o Plomo?" – Silver or lead (bullets)?

Given that demand and the rising cost of components have now priced ammunition several times higher in all calibers than last year, perhaps those who stack both silver and ammo should change this phrase to "Plata y Plomo"... Silver and Lead.

The picture nearby from a local gun range shows something well beyond the Fed's sub-2% inflation target.

But then they also said it would be acceptable to let inflation "run hot." Last year a box of .22 rounds could be had for less than $25. Is the Fed getting what they asked for?

Inflation? Deflation? Both?

This debate has gone on for several years as governments continue to ramp up spending. Oversimplified, if they let our debts default, the result is deflation.

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